Probate is the legal process in which a person's post-mortem legal and financial affairs are finalized. The Superior Court for the county in which the decedent lived would have jurisdiction over the probate proceedings. The probate process can take at least six months and, in some instances, years.
Probate Process
If you have already nominated an executor in your will, this person has to file a petition, along with the will, with the Superior Court to be appointed as executor. If you do not have a will, the California Probate Code provides a list of persons who have priority to petition to become your executor. Notices are also sent to the heirs and/or relatives to advise them as to when the hearing will be held. Should there be objections to the petition, or should the validity of the will be contested, the Judge will address these issues at the hearing. After hearing, the executor then performs his/her duties, including: account for the estate's assets and liabilities; locate creditors and pay bills; file tax returns; and manage the estate assets if necessary. After the executor completes all of the duties, s/he files another petition with the court asking that the estate be distributed to the heirs. After the petition is granted, the executor distributes the assets to the heirs according to the will and then files final tax returns for the estate. The probate process concludes when all of the above is completed.
Probate Costs
The filing fee for a probate petition is a minimum of $320, with higher fees depending on the county. For example, the fee in San Francisco County ranges from a minimum of $335 to over $3,625 for larger estates.
While California Probate Code section 10810 sets the maximum statutory fees that attorneys can charge for a probate, the Probate Court may order higher fees be paid for more complicated estates. California statutory fees may be doubled if both the attorney and the executor are paid a fee.
Generally, an inventory of the estate determines the value of the estate. However, if accounting of the estate has been waived, the total value of the estate is the inventory, plus gains on sales, minus losses on sale, for determination of attorney's fees. Debts are not included in determining attorney's fees. Therefore, for example, if the estate includes a house that is appraised at $1,000,000, and the mortgage on the house is $900,000, the house will be valued at $1,000,000 for the purpose of calculating attorney's fees.
California Probate Code section 10810 provides the following formula for calculating the fees based on the estate's value:
(1) 4% on the 1st $100,000;
(2) 3% on the Next $100,000;
(3) 2% on the Next $800,000;
(4) 1% on the Next $9,000,000;
(5) 0.5% on the Next $15,000,000;
(6) Any amount > $25,000,000, the Probate Court is to determine a reasonable amount.
Below is a demonstration of how much Probate fees may be for a single lawyer or representative:
Estate Value Statutory Fee
$100,000 $4,000
$200,000 $7,000
$300,000 $9,000
$400,000 $11,000
$500,000 $13,000
$600,000 $15,000
$700,000 $17,000
$800,000 $19,000
$900,000 $21,000
$1,000,000 $23,000
$1,500,000 $28,000
$2,000,000 $33,000
$3,000,000 $43,000
$4,000,000 $53,000
$5,000,000 $63,000
$6,000,000 $73,000
$7,000,000 $83,000
$8,000,000 $93,000
$9,000,000 $103,000
$10,000,000 $113,000
Other fees that apply in addition to the above statutory fees such as appraisal fees, publication costs, and miscellaneous fees charged by the county. Probate referees, appointed by the State Controller to appraise estate assets for their fair market value, are paid 0.1% of the assets appraised. Again, the fair market value of an asset includes the gross value, and is not reduced for debts, such as mortgages, which often results in an appraised value for your estate that is higher than the equity you had in the property. The San Francisco estate planning attorneys at Oddie, Lynn & Grisanti, P.C. can prepare an estate plan for you to minimize or eliminate probate fees. Depending on the size of your estate, the cost of an estate plan can be substanially less than statutory probate fees.
Avoiding Probate
Not all estates need to be probated. In California, probate estates of $100,000 or smaller need not be probated. Under certain circumstances, the small estate law may apply even if the actual estate is in excess of $100,000 because certain assets are not defined as probate assets. These include assets held in joint tenancy, revocable living trust assets, life insurance not payable to the estate, Individual Retirement Accounts (IRAs), and deferred compensation plans (e.g. 401k, 403b, 457, qualified pension, etc.).
Small estate assets are administered by presenting affidavits to the various financial institutions where the assets are held. The financial institutions then turn over the assets to the executor (named in the will). The executor in turn distributes the assets according to the will. If the decedent dies intestate (dies without a will), the assets are distributed under the rules of intestate succession to the decedent's nearest relatives (surviving spouse, surviving children, surviving parents, and so on).
Spousal Property Petitions may be utilized if the decedent has a surviving spouse. The petition allows the surviving spouse to change the titles of the assets to the surviving spouse alone. As a simplified probate, it is much quicker and the associated legal fees are typically substantially lower than a full probate.
Assets owned by two or more people as joint tenants are typically not probated. The joint tenancy is documented in the title of the account by words such as "JT TEN," "JTWROS," or "as joint tenants" and the like. When a joint tenant dies, the surviving joint tenant(s) take 100% ownership of the asset. This process overrides contrary provisions of the will or trust of the deceased joint tenant. If this result is not intended, some other form of ownership should be used. There are tax implications associated with joint tenancy ownership which may affect the decision on the form of ownership. Your trusted advisors at Oddie, Lynn & Grisanti, P.C. will fully apprise you of these issues and help you properly title your property.
Revocable Living Trusts are also often utilized to avoid probate. Besides the savings on probate fees, trust administration is typically shorter than probate as well. Additionally, conservatorship proceedings may also be avoided with a properly drafted trust, thus achieving additional cost-saving. These trusts, if properly drafted, may also achieve certain Federal estate and gift tax savings. You may retain full control during your lifetime and may revoke/amend/change the terms of the trust anytime during your lifetime. Your trusted advisors at Oddie, Lynn & Grisanti, P.C. will help you determine if a revocable living trust is an appropriate estate planning vehicle for you.
